Budget 2019: Only a marginal increase for the defence sector

After the Pulwama suicide attacks and Balakot airstrikes in February, national security was at the centrestage of Indian politics and completely dominated the general election campaign. But, the first regular budget of Modi 2.0 has only given a marginal increase of 0.01 per cent for defence, in comparison to the Interim Budget presented in February. Three services were expecting a lot from Union Finance Minister Nirmala Sitharaman, who was the defence minister in the first Modi administration.

The defence budget for 2019-20 stood at Rs 3.19 lakh crore for revenue, capital and civil heads, and Rs 1.12 lakh crore for defence pensions.

The Interim Union Budget 2019-20, presented in Parliament on February 1, before the Lok Sabha elections, allocated Rs 4.31 lakh crore to the ministry of defence. Of this, Rs 3.01 lakh crore had been earmarked for the defence budget.

Former defence minister Sitharaman hardly mentioned defence and national security in her two-hour-long maiden budget speech. The only mentions were about the customs duty on imports of defence equipment.

"Defence has an immediate requirement of modernisation and upgradation. This is a national priority. For this purpose, import of defence equipment that is not manufactured in India are exempt from the basic customs duty," Sitharaman said. And, the ministry of defence claimed that this will augment the defence budget by approximately Rs 25,000 crore on account of savings in expenditure on customs duty over the next five years.

While comparing the budge allocation, it is 6.87 per cent higher than the revised estimates of last year, which was Rs 2.95 lakh crore, excluding pensions. Defence officials believe that the hike is meagre, considering the mega defence tenders lined up. Defence ministry, in a statement, said that the allocation of Rs 3,18,931.22 crore represents a growth of 7.93 per cent over budget estimates (2,95,511.41 crore) for 2018-19.

"As part of the military modernisation process, this hike literally has no meaning. Moreover, majority of the allocated money will go for committed liabilities. It is giving with one hand and taking away with another," said a defence official, while adding that customs duty exemption is a small relief for the services. Three services have approached the government over customs and Goods and Service Tax (GST), which the military has objected to. In 2016, the ministry had assured the three services that they will reimbursed the custom duty paid by them, but it never happened.

"The capital allocation of the ministry of defence under budget estimates 2019-20 is 31.97 per cent of the total capital expenditure, which is Rs 3,38,569 crore," the ministry of defence in a statement said.

For re-equipping armed forces, the defence ministry received Rs 1.03 lakh crore, but with a heavy baggage of committed liabilities of the previous years, there is hardly any money left for the new purchases. For the revenue budget, which will pay salaries and day-to-day activities, allocation is Rs 2.02 lakh crore. Amongst the three services, IAF got the maximum for its modernisation. Rs 39,302 crore has been given to the IAF to make payments for Rafale fighter jet, Apache attack helicopters and Chinook choppers. Moreover, the IAF also has to make payments for its S-400 air defence missile systems from Russia. For its Rafale jet deal, the IAF has already paid around Rs 34,000 crore to the jet manufacturer. An instalment of Rs 13,000 crore will be made later this year. The total cost of 36 Rafale jets with 13 India-specific enhancements will be Rs 59,000 crore, and the first aircraft is expected to be delivered by the end of this year. All 36 Rafale jets will arrive in India by 2022. But, there are many critical and important defence programs of IAF like mid-air refueller, which have been neglected for long, probably due to budgetary constraints; the 1960s vintage Avro transports, once workhorses in logistics duties, are in poor condition and need urgent replacement.

The Army has got a marginal increase in its modernisation budget as it has received Rs 29,416 crore, compared to Rs 26,813 crore for last year. Though the Army has managed to get the first artillery gun after three decades, with the induction of M777 ultra light howitzers and K9 Vajra, but it still needs bullet-proof jackets, combat rifles and light utility helicopters—a lifeline for soldiers posted at the inhospitable Siachen Glacier. The Indian Navy has received Rs 23,156 crore compared Rs 20,890 crore in the last year's budget allocation.

In the year 2018-19, India spent only 1.57 per cent of Gross Domestic Product (GDP), the lowest since the 1962 war with China. And, this year, it is 1.5 per cent of the GDP. Incidentally, China allocated 3 per cent and Pakistan spends 3.5 per cent of their GDP on defence. While India has 1.25 soldiers per 1,000 people, China has 2.23 and Pakistan 4.25.